Puerto Rico moves to cancel Whitefish power contract after uproar

WASHINGTON/NEW YORK (Reuters) - Puerto Rico's government power company said on Sunday it would move to cancel a $300 million repair contract with a tiny Montana company to restore power to the storm-hit U.S. territory after an uproar over the deal.

The contract between Whitefish Energy Holdings and Puerto Rico’s bankrupt power utility has come under fire after it was revealed that the terms were obtained without a competitive public bidding process.

Earlier on Sunday, Puerto Rico's Governor, Ricardo Rosselló had called for the contract with Whitefish to be canceled and Puerto Rico Electric Power Authority's (PREPA) Director Ricardo Ramos said he had accepted the governor's recommendation.

Ramos said that he had to consider the “reputation risk” as well as “delay risk” in taking such a step, but noted that the initial enthusiasm from residents over Whitefish employees coming to the island had changed in the last several days after media started to report the details of the contract.

Ramos said contract terms with Whitefish meant that the cancellation would become effective 30 days from notice and, signaling potential intricacies, explained that there were "a lot of logistics involved. I believe they have people on the way here."

"The contract is not canceled as of yet. I am writing today a letter to the board of directors of PREPA asking for a resolution that will allow me to cancel the contract," Ramos said.

He acknowledged that public perception had soured on how the contract was awarded.

“As soon as this whole issue was interpreted by the tabloids that PREPA has given away $300 million to a company with little experience…if you read that, and you have no light and no water that perception changes abruptly to the extent that the last four days they’ve been throwing stones and bottles” at workers, Ramos said.

Criticism increased after a copy of the contract with PREPA surfaced online on Thursday night and raised more questions, particularly over language blocking oversight of costs and profits.

Whitefish officials have said they secured the deal legitimately and would not oppose an audit of the company's work. A Whitefish spokesman could not immediately be reached for comment after Sunday's announcement.

Whitefish, which has a full-time staff of two people, says it has now more than 325 people on the island working to restore power.

APPEAL TO NEW YORK, FLORIDA

Several weeks after Hurricane Maria hit Puerto Rico, about 75 percent of homes and businesses still lack electricity.

“Following the information that has emerged, and with the goal of protecting public interest, as governor I am asking government and energy authorities to immediately activate the clause to cancel the contract to Whitefish Energy,” Rosselló said in a statement to reporters.

He said he had reached out to Florida Governor Rick Scott and New York Governor Andrew Cuomo to seek help in replacing Whitefish and that they were prepared to assist in restoring power.

"I have given instructions to immediately proceed with the necessary coordination with the states of Florida and New York, in order for brigades and equipment to arrive on the island," Rosselló's statement said.

Speaking to CNN, Cuomo said he could send hundreds of work crews to Puerto Rico to assist with the repair work.

Scott's office did not immediately respond to requests for comment.

The Puerto Rican government is bracing for the possibility that Whitefish would sue for breach of contract if the cancellation is approved, according to sources familiar with discussions. The government already paid Whitefish $8 million and does not expect the U.S. Federal Emergency Management Agency to reimburse that sum, the sources said.

Rosselló said he had requested an investigation into how the contract between PREPA and 2-year-old Whitefish was decided upon so quickly.

The contract and the slow restoration of power on the island have raised questions about the management of PREPA’s response to Maria.

It took about a week for PREPA to complete a damage assessment while residents were relying on diesel generators and most of the island remained in darkness.

Whitefish spokesman Ken Luce had said the deal was secured when the company's chief executive officer and co-owner, Andy Techmanski, flew to Puerto Rico on Sept. 26, six days after Maria tore into the island.

PREPA had been in contact with Whitefish following Hurricane Irma, which did less damage to the island, in a formal bidding process that was not completed because Maria had hit. There was no formal bidding process after Maria, Luce said, but he termed the contract in “good faith” and “fair” to PREPA.

Puerto Rico’s financial oversight board earlier this week said it would appoint an emergency manager to oversee PREPA, but Rosselló resisted that idea.

PREPA has a $9 billion debt load caused by years of unsuccessful rate collection efforts, particularly from municipal governments and state agencies, and a lack of investment in equipment and maintenance.